The next frontier: How E-commerce is reshaping Nigeria’s informal economy

Has e-commerce truly lived up to its potential of reforming Nigeria’s vast informal economy, offering financial inclusion, digital empowerment, and a pathway to sustainable growth?

Nigeria stands at the cusp of an e-commerce revolution, with digital adoption transforming not just how consumers shop but also how businesses scale in a $100 billion informal retail market. However, operating outside formal structures means many small businesses may still struggle with visibility, access to capital, and expansion beyond their immediate communities.

E-commerce platforms are doubling down on strategies to provide a digital marketplace that connects businesses to millions of customers nationwide. By leveraging technology, logistics, and fintech solutions, micro, small, and medium enterprises (MSMEs) are empowered to scale sustainably in the informal market.

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Expanding consumer reach

Nigeria’s informal sector accounts for over 57 percent of the country’s GDP. A recent report released by Jobberman Nigeria, in partnership with the Mastercard Foundation, states that the informal sector employs 76.7 percent of Nigeria’s workforce, signalling an expansive growth in this sector. However, for many entrepreneurs in Nigeria, the biggest challenge is not just producing or selling products—it’s delivering them. What is commonly obtainable is that distribution channels often limit MSMEs to their immediate surroundings or regions. E-commerce has rethought this narrative by increasing pick-up stations, hyperlocal delivery networks, and alternative last-mile delivery solutions.

As of mid-2024, Jumia, a leading online platform, has established over 200 pickup stations and more than 24,000 active independent sales consultants nationwide. Through this City Expansion Initiative, Nigerians can enjoy the convenience of accessing needed products even in rural and suburban areas where last-mile delivery systems may seem challenging.

Increasing Visibility for Small Businesses (MSMEs)

With the rise of digital shopping, small businesses no longer need to rely solely on traditional brick-and-mortar stores to attract customers. Studies indicate that 81% of consumers research products or services online before making a purchase. Through e-commerce, vendors can now list products online and fulfil orders nationwide, expanding their customer base beyond local borders.

E-commerce empowering local manufacturers

Nigeria’s push for Made-in-Nigeria goods is gaining momentum with the rise of e-commerce. Local manufacturers, often sidelined by imported goods, are tapping into online marketplaces to reach a wider customer base. E-commerce provides Nigerian producers with a virtual shop-front, allowing them to showcase and sell their products to consumers across the country.

This direct access to a national market not only helps reduce dependence on imports but also fosters the growth of local industries, contributing to the county’s economic growth.

Digitising payments and access to financial services

Access to finance is a significant challenge for informal businesses in Nigeria, as they lack formal financial records. E-commerce platforms like Jumia are addressing this by enabling digital payments and enhancing financial credibility, thus enabling more operations in the informal economy.

Through fintech integrations on e-commerce, small companies can build a digital footprint that promotes financial inclusion and formalisation of the informal sector.

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Job creation through e-commerce

Beyond vendors, e-commerce is unlocking new income streams for thousands of Nigerians. According to Statista, revenue in the e-commerce market in Nigeria is projected to reach US$7.04bn in 2025, contributing significantly to job creation and economic growth. A report by Boston Consulting Group reveals that online digital platforms, such as Jumia, which match buyers and providers of goods and services, could create about 3 million new jobs in Africa by 2025.

In my view, Jumia Nigeria’s expansion of pick-up stations has demonstrably boosted job creation across the nation. The sheer scale of their ecosystem, with its direct and indirect employment opportunities in customer service, logistics, and technology, is a testament to this positive impact.

It’s undeniable that every business faces obstacles. However, I strongly believe that the e-commerce sector, in particular, must proactively address these challenges. By viewing them as opportunities for innovation, we can unlock transformative growth.

Sunil Natraj, a tech leader, writes from Lagos.